Home Economy News Govt panel members urge BOJ vigilance on weak yen’s impact on demand

Govt panel members urge BOJ vigilance on weak yen’s impact on demand


By Makiko Yamazaki and Kentaro Sugiyama

TOKYO (Reuters) – Private-sector members of a key government panel on Friday urged the Bank of Japan to be vigilant to the risk of sharp declines in the yen currency triggering “excessive” price rises that hurt private demand.

Despite some positive signs in corporate earnings, stock prices and wages, consumption is lacking strength as the yen’s continued declines push up inflation, the private-sector members said in a policy proposal submitted to the Council on Economic and Fiscal Policy (CEFP).

“As sharp yen declines and rising commodity prices could have a major impact on prices, it’s important to closely monitor those developments,” the proposal said.

“Given that excessive price hikes could curb private demand, we hope the BOJ guides monetary policy appropriately to achieve its 2% inflation target in a sustainable and stable manner,” it said.

While a weaker currency has helped Japan’s powerful exporters, the proposals underscore growing public concern over the disadvantages of a weak yen, such as hurting consumption by pushing up the cost of raw material imports.

The Japanese authorities are suspected to have intervened on at least two separate occasions last week to support the yen after it hit lows last seen more than three decades ago.

It remains under pressure, though, given the wide gap between Japanese rates that remain near zero even after the BOJ’s landmark decision to end negative rates in March, and much higher U.S. and other rates that draw funds away from the yen.

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BOJ Governor Kazuo Ueda has said the central bank will scrutinise how the yen’s recent declines affect the economy and inflation.

Policy proposals by the private-sector members usually serve as basis for discussions at the top economic council, which sets the government’s long-term economic policy and priorities.

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